major macro economic indicators
|2020||2021||2022||2023 (e)||2024 (f)|
|GDP growth (%)||-6.6||4.6||4.9||0.4||1.3|
|Inflation (yearly average, %)||1.4||2.7||8.6||7.5||3.7|
|Budget balance (% GDP)||-8.0||-5.8||-3.2||-2.5||-1.4|
|Current account balance (% GDP)||3.0||0.4||0.7||1.7||1.9|
|Public debt (% GDP)||82.9||82.3||78.5||78.2||77.7|
(e): Estimate (f): Forecast
- High standard of living (GDP per capita relatively high compared to the neighbouring countries)
- Industrial and tertiary diversification, high added value
- 31% of energy consumption (including imports) sourced from renewable supplies (2021), main source is hydro-energy, share of renewable energy in power production is 78%
- Major tourist destination (ranked 10th worldwide in 2022; tourism represented 5.3% of the Austrian GDP before the pandemic in 2019, but halved to 2.7% in 2021)
- Very dependent on the German and, to a lesser extent, Central and Eastern European economies
- Banking sector exposed to Central-Eastern European and Balkan countries
- Not a member of NATO, no application for membership officially intended
Modest recovery in 2024, after almost stagnating in 2023
The economy will probably stagnate in 2023. Activity slowed in the first half of the year, but is expected to gradually recover in the second half. The reason for this wobbly outlook is the diametric development between the manufacturing sector, which has been in a recession since mid-2022 due to very poor demand from its main export destination Germany, and strong momentum in services, especially in financial and economic services, and tourism. The 2022-2023 winter ski-season was very successful (only 5% below the record season of 2019). In 2024, the manufacturing sector should progressively display a hesitant recovery in line with a mild recovery in Western Europe, including fledging recovery in Germany, and, on the other, service sector activity should further increase due to even stronger demand from tourism and gastronomy. Together, this will further sustain economic activity in 2024.
On the demand side, private consumption put a brake on economic activity in 2023, but should make a noticeable comeback in 2024. Austrian collective wage agreements are almost automatically indexed to the pace of inflation over the previous twelve months. In 2022, collective wages increased by 3.1%, and, together with a strong increase in employment and with many state support measures, the Austrian Central Bank estimated that real disposable household income had reached +0.6%. In 2023, wages should increase by 7.6% (the considered GDP-deflator). However, with less state support, and wage increase only balancing out consumer prices, private consumption has decreased and is only shored up by a decrease in the household savings rate. In 2024, the interaction between inflation and wages should reverse and drive consumption despite an increase in the private savings rate. Inflation is expected to ease further but is likely to still hover around 3.8% at the end of 2024 due to its sticky services component, while collective wages should increase by 6.5%. The European Central Bank (ECB) has reacted to the high level of European inflation. Between January and July 2023, it increased its key marginal lending rate four times by a total of 175 basis points to 4.25%, placing it at one of the highest levels in the central bank’s history. With Austrian and European inflation on the decline, the ECB should adopt a “wait-and-see” attitude. The first rate cuts are not likely before mid-2024, however. In terms of quantitative easing, the ECB already stopped the reinvestments of its APP program in July 2023. Maturing paper in its Pandemic Emergency Purchase Program (PEPP) have been fully reinvested until at least the end of 2024. This unusually high interest rate keeps the momentum of private and corporate investments low. Equipment and housing construction investments should remain negative in 2023 and only partly be balanced out via Research & Development, and other construction investments. In 2024, on back of hesitant recovery in the manufacturing sector, equipment investments will be needed, while housing construction should keep to its downward trend due to the high financing costs in combination with pricy materials and a lack of skilled workers. Meanwhile, the public sector has switched bank to its austerity path, which will have a negative (in 2023) or probably a neutral impact (in 2024) on economic growth. Some positive signs are emanating from foreign trade, where exports should trend more favourably than imports in 2023 and 2024 thanks to services.
Declining budget deficit and rising current account surplus
In 2023, we expect the current account surplus to have probably picked up and increase further in 2024. One main driver is the services surplus that will increase thanks to strong inbound tourism. Moreover, the trade in goods balance should improve further in 2024 thanks to enhanced terms of trade, while increases in both export and import volumes should level each other out. The deficit in the balance of investment income should remain without major changes, which should be also the case for the structural deficit of the balance of transfers.
The public budget should remain in deficit for the fifth year in a row in 2024. While the introduction of inflation indexation on income tax will decrease the revenue from 2023 onwards, the Covid-19 related support measures have already decreased markedly in 2023 and will do so further in 2024. In addition, energy-price related subsidies (such as the electricity cap) will terminate in the summer of 2024, thereby bringing down the deficit further. The weight of public debt as a share of GDP will probably decrease further due to a combination of limited public deficits and strong nominal GDP growth.
Round robin in the polls before the general election in 2024
Karl Nehammer from the centre-right Austrian People's Party (ÖVP) has been the Chancellor of the Alpine Republic and leading a coalition out of ÖVP Since December 2021 (holding 71 out of 183 seats in Parliament) and the Greens (26 seats). Nehammer is the successor to Alexander Schallenberg (who was acting as interim chancellor for some months only), and before him, Sebastian Kurz (both ÖVP). Kurz stepped down and lelft the political landscape after a corruption scandal in October 2021. Since then, the ÖVP has lost much support in the public opinion stakes and obtained only 23% of votes (in third place) in the polls of summer 2023 against 37.5% in the last general elections held in 2019. The coalition partner, the Greens, has also lost some of its support (from 13.9% in the election to 10% in summer 2023, placing fourth), which throws doubt on the current government coalition holding onto office after the next election scheduled for the autumn of 2024. The national-populist FPÖ, with its controversial leader Herbert Kickl, has been leading the polls since November 2022 and would win 28% of the votes according to the same polls. Second in the polls is the social-democrat SPÖ party, which has lost support due to internal rifts (its share of support was 24% in the polls of the summer of 2023). The election of the new SPÖ party leader in spring 2023 should have eased tensions, but had only limited success owing to the chaotic election process. In the end, Andreas Babler from the left wing of the party held the lead. While it is clear there will be no coalition between the SPÖ and FPÖ under Babler, he also ruled out an often-used coalition with the ÖVP and the liberal Neos (10% of the polls). At the same time, the ÖVP has ruled out a coalition with the FPÖ as long as Kickl is leader, as well as with the left KPÖ (which gained 4% at the polls; Austria imposes a 4% threshold to enter Parliament). This means that three-party coalitions without two of the bigger parties (FPÖ, SPÖ or ÖVP) would not have enough support to form a majority coalition. Political uncertainty ahead of the election is high, but Austrian political parties have always found a way to build a coalition in widely differing tie-ups despite their leaders’ initial reluctance. If the new coalition includes the FPÖ, the Austrian government would turn its back more on the EU and reduce investments in environmental projects.
Last updated: September 2023
SWIFT and SEPA (within the EU) transfers are commonly used for domestic and international transactions and offer a cost-effective, quick, and secure means of payment.
Bills of exchange and, to a lesser degree, cheques are most commonly used as a means of financing or payment guarantee. Nevertheless, neither are widely used nor recommended, as they are not always the most effective means of payment., bills of exchange must meet relatively restrictive mandatory criteria to be valid, which deters business people from using them. In parallel, cheques need not be backed by funds at the date of issue, but must be covered at the date of presentation. Banks normally return bad cheques to their issuers, who may also stop payment on their own without fear of criminal proceedings for misuse of this facility.
As a rule, the collection process begins with the debtor being sent a demand for payment by registered mail, reminding him of his obligation to pay the outstanding sum plus any default interest stipulated in the sales agreement or terms of sale.
Where there is no interest rate clause in the agreement, the rate of interest applicable semi-annually from August 1, 2002 is the Bank of Austria’s base rate, calculated by reference to the European Central Bank’s refinancing rate, marked up by eight percentage points.
For claims that are certain, liquid and uncontested, creditors may seek a fast-track court injunction (Mahnverfahren) from the district court via a pre-printed form. The competent district court for this type of fast-tract procedure expedites the requisite action for ordinary claims up to EUR 75,000 (previously EUR 30,000).
With this procedure, the judge will issue an injunction to pay the amount claimed plus the legal costs incurred. If the debtor does not appeal the injunction (Einspruch) within four weeks of service of the ruling, the order is enforceable relatively quickly.
A special procedure (Wechselmandatsverfahren) exists for unpaid bills of exchange under which the court immediately serves a writ ordering the debtor to settle within two weeks. However, should the debtor contest the claim, the case will be tried through the normal channels of court proceedings.
If the debtor has assets in other EU countries, the creditor may request the Vienna Commercial Court to issue a European Payment Order for undisputed debts, enforceable in all EU countries (except Denmark).
Where no settlement can be reached, or where a claim is contested, the last remaining alternative is to file an ordinary action (Klage) before the district court (Bezirksgericht) or the regional court (Landesgericht) depending on the claim amount or type of dispute. Defendants have four weeks to file their own arguments.
With regards to the regional courts, defendants are expected to put forward their own arguments in response to the summons, and are allowed four weeks to do so.
A separate commercial court (Handelsgericht) exists in the district of Vienna alone to hear commercial cases (commercial disputes, unfair competition lawsuits, insolvency petitions, etc.).
During the preliminary stage of proceedings, the parties must make written submissions of evidence and file their respective claims. The court then decides on the facts of the case presented to it, but does not investigate cases on its own initiative. At the main hearing, the judge examines the written evidence submitted and hears the parties’ arguments as well as witnesses’ testimonies. An enforcement order can usually be obtained in the first instance within about ten to twelve months. The Civil Procedure Code provides that the winning party at issue of the lawsuit is entitled to receive full compensation from the losing party of all necessary legal fees previously incurred.
Enforcement of a legal decision
A judgement becomes enforceable when it becomes final. If the debtor does not respect the court’s judgement, the court can issue an attachment order or a garnishment order. Alternatively, the court can seize and sell the debtor’s assets.
For foreign awards, circumstances may vary depending on the issuing country. For EU countries, the two main methods of enforcing an EU judgment are the European Enforcement Order or under the provisions of the Brussels I regulations. For non-EU countries, judgments are recognized and enforced provided that the issuing country is party to an international agreement with Austria.
Out-of Court proceedings
Out-of court restructuring efforts and negotiations are usually antecedent to insolvency proceedings. They constitute a means to obtain recapitalization loans in exchange for a secured creditor status.
A pre-requisite for a restructuring proceeding is that the debtor files for the opening and at the same time submits a restructuring plan. This proceeding is either self-administrated or administrated by an administration. For self-administrated restructuring, the debtor must file an application of self-administration complemented by qualified documents and a restructuring plan that provides a minimum quota of 30%.
Liquidation proceedings aim to equitably realise the various creditors’ rights. The proceedings are led by a trustee in bankruptcy which takes control of the business, sells the assets, and divides the proceeds among the creditors.
Retention of title
Similar to Germany, Retention of Title is a written clause in a contract, which states that the supplier will retain the ownership over the delivered goods until the buyer made full payment of the price. This usually takes one of three forms:
- simple retention: the supplier will retain the ownership over the goods supplied until full payment is made by the buyer;
- expanded retention: the retention is expanded to further sale of the subsequent goods; the buyer will assign the claims issued from the resale to a third party to the initial supplier;
- extended retention: the retention is extended to the goods processed into a new product, and the initial supplier remains the owner or the co‑owner up to the value of its delivery.